Mortgage repayment is the foremost financial concern for most homeowners. Some even submit extra mortgage payments to pay off their home loans early.
Interested in following the lead of these fastidious property keepers? Consider your options carefully. This zealous repayment approach has both benefits and drawbacks.
Of course, financial security is the most obvious benefit of early repayment. After you’ve submitted your last mortgage payment, you can rest assured knowing you’ll always have someplace to call home and a major asset to your name. Plus, it’s always easier to navigate career or life changes when you don’t have to worry about your mortgage.
This kind of financial security is nothing to laugh off in today’s mercurial economy. Only half of Americans consider themselves financially secure, according to The Pew Charitable Trust. Paying off your mortgage ahead of schedule might land you in an enviable position and make things like retirement a real possibility.
Early repayment can also save you thousands of dollars in interest payments, Investopedia reported. Homeowners sticking with stock repayment strategies, based on amortized schedules, spend large amounts on interest and pay little on their principle loan amounts, especially in the initial years of their home financing agreements. By submitting extra payments and quickly whittling down your principle, you can dodge interest payments and save serious cash.
Facilitating early repayment
There are a variety of methods for achieving early repayment. First, look into switching over to a bimonthly payment plan. This will give you a standardized framework for submitting extra cash and enable you to stick to your early repayment strategy. Additionally, rounding up your current payment is another solid technique, Real Simple reported. Tacking on a little extra money each month can go a long way.
“There are a variety of methods for achieving early repayment.”
Also, make lump sum payments anytime you can. Get a robust tax return? Earn a healthy bonus? Instead of pocketing these amounts, send them to your lender. You’ll thank yourself a decade down the line.
Some mortgage experts advise against early repayment for a number of reasons. Tax deductions are a common point of emphasis for those opposed to extra payments, according to U.S. News and World Report. Homeowners are entitled to a number of juicy tax deductions, including one that enables them to deduct mortgage interest. Of course, if you repay your home loan amount too quickly, you can’t take advantage of such deductions.
Others say aggressive early repayment schedules make it hard for homeowners to repay more pressing debts, like student loans, or build up emergency savings. Choosing to pay your mortgage ahead of schedule carries serious financial implications and affects your day-to-day spending.
Alternatives to early repayment
Early repayment opponents advise homeowners to hang onto their extra cash and invest instead. Many also advocate earmarking some for retirement plans.
Of course, whether or not you repay your home loan early depends on your financial situation. So, before picking an approach, look over the books to see what works best for you and your family.